Unfortunately, there is no one answer to how long a trustee has to distribute assets, as every trust and every family situation is different. In some cases, beneficiaries should give a trustee the benefit of the doubt when distributions are delayed for justifiable reasons, like paying debts or selling property. However, in other cases, the timeline may be unjustifiably long, and it may be up to the beneficiary to pursue legal action to ensure the rightful distribution of assets.
Understanding the factors that influence a trust distribution timeline can help you determine whether more actions are necessary and what the appropriate next steps should be. It’s a good idea to pursue the support of an experienced trust litigation attorney to help you understand the best path forward.
In this guide, we’ll outline the factors that influence this timeline and illustrate how this might look in a real-world situation using a hypothetical case.
Steps a trustee must follow for distributing trust assets
It is a trustee’s responsibility to ensure trust administrative tasks are handled competently and assets are distributed in line with the trustor’s wishes. To do so, trustees should keep all the following steps in mind.
1. Identifying trust assets
One of the first steps of the asset distribution process is for the trustee to identify all relevant trust assets. This process will include gathering an inventory of all assets so that they can be accounted for, appraised, and distributed equitably or accurately in accordance with the terms of the trust document. From there, the trustee will be able to determine what and how to distribute assets to the appropriate beneficiaries.
2. Understanding trust terms and conditions
It’s essential that trustees know the terms and conditions of a trust document so that they can act in accordance with the trustor’s intent. Understanding the trust document will allow trustees to preserve the trustor’s wishes and uphold the rights of the named beneficiaries.
A trust document often will outline all the following points:
- The timeline for distributing the trust
- The beneficiaries who will receive assets from the trust
- To whom and what assets are to be distributed, including how to divide assets that are not specifically bequeathed – i.,e. the trust remainder
To effectively distribute assets, the trustee must understand all of the above. Once they understand what the trust provides, it will be up to the trustee to act upon the trust terms and carry out those terms appropriately.
3. Following legal obligations and timelines
The trustee is obligated to distribute assets in a reasonable amount of time. Unfortunately, what constitutes a reasonable amount of time is specific to the facts and circumstances of each case, so it is not completely established under the law, leaving some room for ambiguity.
The timeline for trust distribution depends on several factors. Often, a trustee must handle a variety of responsibilities before distributing the trust’s assets, like paying creditors, expenses and property, income or estate taxes. Only after all these responsibilities are fulfilled can the trustee distribute assets to beneficiaries.
Still, timelines can vary based on additional factors, like the complexity of assets, the size of the estate, or if any disputes arise throughout the process.
Trust distribution timelines in action
To understand a trustee’s responsibilities in the trust distribution process and the potential complexities that could arise, we’ll examine the following hypothetical scenario. This example may highlight potential challenges as well as possible legal mechanisms and outcomes. Remember that every case is unique, so it’s important to consult with an experienced trust litigation attorney to determine the best course of action for your situation.
Susan passed away in California. Susan established a trust with several assets, including two residential properties. However, two of the properties were not properly transferred into the trust before her death.
Taylor, the Trustee, had to file a Heggstad petition to transfer the properties into the trust, which led to a delay in distribution. Between filing the petition and handling the required court proceedings for court approval of the transfers into the trust, the trust administration process was delayed for many months, leading to a disenchantment among beneficiaries.
Taylor attempted to communicate the reason for the delay, but the beneficiaries became frustrated and took action to address what they perceived as an unnecessary delay.
Steps a beneficiary should follow during trust administration
To ensure a smooth trust asset distribution, beneficiaries would be well-advised to participate meaningfully and cooperate with the trustee in the administration of the trust. A beneficiary should consider all the following steps to do so.
1. Know your rights
Beneficiaries have key designated rights when it comes to trust asset distribution. These include the right to receive regular accountings of the trust’s assets and liabilities, a report of trustee actions, and the right to timely distributions. It’s important to understand these rights so that they can hold the trustee accountable throughout the process.
A trustee must be transparent with the beneficiaries and other interested parties in the estate. Beneficiaries have a right to information about the process, and they can petition the court for information if a trustee does not disclose information about their management of trust assets.
If the trustee does not follow their responsibilities in the trust administration process or commits a breach of fiduciary duty, then the beneficiary has a right to object to trustee actions or petition for trustee removal.
2. Communicate with the trustee
Beneficiaries should maintain a consistent line of communication with the trustee to maintain a sense of transparency throughout the process. Communicating with a trustee can also allow a beneficiary to understand any potential delays in trust distribution and what the timeline for the estate administration process looks like.
Beneficiaries can maintain regular communication with the trustee by establishing clear, preferred communication channels, scheduling regular meetings or calls, requesting regular reports, and reaching out with any questions.
3. Pursue legal recourse for delays
If you are the beneficiary of a trust and the trustee refuses to distribute trust assets, causes unnecessary delays in the process, or fails to communicate with you, you should contact a trust litigation attorney immediately to discuss the situation. Although trustees can sometimes withhold money from beneficiaries when they are justified in doing so, the legal requirements a trustee must follow depend on the trust’s language.
An experienced lawyer can review the trust instrument and advise you as to when you are entitled to collect distributions. If a trustee is wrongfully withholding trust distributions from you, a trust litigation attorney can then help you pursue legal action to secure the assets you are entitled to receive.
Beneficiaries exercising their rights in action
In our above case scenario, the beneficiaries became frustrated with Taylor for the delay in the trust administration process. Despite Taylor explaining the complications causing the delay, the beneficiaries felt that the process was taking too long and suspected mismanagement.
Following their suspicions, they did exercise their rights by filing a breach of fiduciary duty claim against Taylor. Susan’s children argued that Taylor failed to administer the trust in a timely manner, causing unnecessary delays and potential financial losses. As a result, both sides had to present their cases to the court.
How long does a trustee have to distribute trust assets?
The amount of time that a trustee has to distribute assets can vary widely. According to California Probate Code §16000, a trustee must administer the trust according to the terms of the trust instrument, including any asset distribution plan set forth in the trust document. Texas laws offer similar guidance, stating that trustees should distribute assets within a reasonable amount of time and in accordance with the terms laid out in the trust document.
Because there are many types of trusts and innumerable trust agreements the timeframe will depend on the distribution plans outlined in the trust document. For example, if a parent establishes a trust intended to provide ongoing support for their child throughout their lifetime, the instrument may call for ongoing, periodic distributions rather than lump sum distributions at the decedent’s death.
On the other hand, if a parent feels that their children are old and mature enough to handle a lump sum distribution, then the assets are likely to be distributed fully after the trustor passes away.
Typically, if a trust calls for a one-time distribution of assets, it will take between 12 and 18 months for the trustee to distribute the assets to the beneficiaries and heirs, depending on various factors, including the complexity of the estate assets, creditor issues, and more. Because the particular requirements vary between trusts, trustees would be well advised to consult with an experienced trust lawyer to ensure they comply with the terms of the trust.
In our case scenario above, Taylor took over a year to administer the trust, which was perceived as a long and unnecessary delay by the trust’s beneficiaries. However, the court eventually ruled that Taylor was justified in the amount of time she took to administer the trust as she acted diligently and fulfilled her fiduciary duty along the way. This scenario shows how the length of time needed to administer a trust can vary widely and how a perceived delay can be justified.
Common reasons trust distributions are delayed
For a trust to be distributed, a trustee must complete the full administration process. Typically, the distribution of assets to the trust’s beneficiaries happens at the end of the process, after a trustee handles other necessary administrative tasks. If the administration of other parts of the trust takes significant time, it could lead to a delay in trust distributions.
Some common reasons for delays include:
- Selling real estate – Selling real estate associated with the trust can take time, delaying the process of receiving the liquid assets to distribute.
- Navigating beneficiary disputes – If there are disputes surrounding the allocation of assets to beneficiaries, then trustees must wait for these to be resolved before they can distribute assets.
- Managing tax issues – A trustee must ensure any property or estate taxes are paid using the assets of the trust before distributing them to beneficiaries. In larger estates, the required estate tax return often causes lengthy delays.
- Handling complex assets – Certain assets may be more difficult to distribute, like businesses or intellectual property, which can take time to gather an inventory and valuation.
In Taylor’s case above, she had to navigate the complications of filing a Heggstad petition and face unavoidable delays caused by Susan’s failure to transfer the properties into the trust, as well as those inherent in the court system. The court ruled that these were all valid reasons to delay the administration of trust assets. This result highlights that unavoidable delays can happen and lengthen the administration process without any fiduciary breach.
What happens if a trustee refuses to give a beneficiary money?
If a trustee refuses to give a beneficiary money, there are several legal avenues that a beneficiary can pursue. Trustees can withhold money, but only in certain circumstances. For example, if a trust document states that funds should not be released to a beneficiary until they turn 18. They may also refuse to distribute assets if they must complete their other administrative tasks first, as in Taylor’s case above.
However, if a trustee is not distributing assets for reasons not outlined in the trust instrument, then a trustee may have no right to do so, and in such a ca,se a beneficiary has a right to pursue a legal resolution.
In this case, a beneficiary has the following options:
- In some situations, they may be able to file a lawsuit for breach of fiduciary duty against the trustee.
- They may also be able to request the probate court to order the trustee to make distributions or suspend or remove the trustee from their trusteeship.
- If the trustee claims that the trust does not have sufficient assets to make distributions, beneficiaries can request an accounting of trust assets from the beneficiaries.
- If the trustee does not provide an accounting when requested, a beneficiary can petition the court to order one.
- If the accounting evidences wrongdoing by the trustee, a beneficiary may seek suspension, removal, and surcharge for any losses caused by the trustee’s acts or inaction.
In our scenario above, the court found that despite the challenge from the beneficiaries, Taylor was justified in delaying the trust administration process. The court held that Taylor had acted diligently in gathering evidence, filed the Heggstad petition promptly, and communicated properly with the court and the beneficiaries. However, the court did note that she could have provided more frequent updates to the beneficiaries to ease their concerns.
Still, her diligence and good faith actions meant that she did fulfill her fiduciary duty and her delays were not unreasonable. As a result, the court preserved her position as trustee so she could continue the process of finalizing property transfers and distributing assets to the beneficiaries. That said, not every case will feature a valid reason for withholding assets.
If you are a beneficiary and have a trustee who has taken an unreasonable amount of time to distribute money to you, you should consult an attorney for guidance. A trust litigation attorney can help review the circumstances surrounding your case and help you determine the best possible option for securing your rightful inheritance if a trustee is not justified in withholding assets.
How beneficiaries can make trust distribution demands
Beneficiaries have several options for making trust distribution demands, including a petition through the court as well as litigation. The best choice depends on the dynamics of the case and the unique situation. In any case, a trust litigation attorney can help determine the best path forward.
The most common methods beneficiaries can follow for making trust distribution demands are:
- Seek legal support – If a trustee is unjustified in withholding assets, a trust litigation attorney can be an invaluable resource in helping a beneficiary navigate the litigation process to receive their rightful inheritance.
- Court petition – A beneficiary can petition the court to demand that the trustee take action and distribute assets if the court sees fit.
In our scenario above, the beneficiaries filed a breach of fiduciary duty claim against Taylor. They asserted that Taylor failed to administer the trust in a timely manner, which caused unnecessary delays and potential financial losses. Although Taylor was ultimately vindicated by the courts as she fulfilled her fiduciary duty, a trustee who causes unjust delays can be removed for a breach of their fiduciary duty.
Despite the options that a beneficiary has for demanding distribution if a beneficiary demands a distribution that does not align with the terms of the trust agreement, then the trustee must decline that request.
A trust administration attorney can provide guidance in understanding the circumstances, assessing whether the trustee is taking an unreasonable amount of time to distribute assets, and determining whether you have a case for litigation or a trust petition.
Types of trust distributions
In addition to the other factors, the time it takes for a trustee to distribute assets can also depend on the type of trust distribution. A trust will often outline how designated assets should be distributed in alignment with the trustor’s wishes.
Different types of trust distributions include:
- Outright distributions – Outright distributions release beneficiaries’ inheritance without any restrictions. This is typically the simplest distribution method and can be made as a lump sum or a periodic distribution.
- Distributions in trust – Distributions in trust are slightly more complex and costly as they require trustees to hold assets and distribute them to beneficiaries over time as outlined in the trust instrument.
- Discretionary trust distributions – Discretionary trust distributions give the trustee authority to decide from a predetermined group of beneficiaries who will inherit assets, how much they will inherit, and when.
Each type of distribution method can influence how long it takes for assets to reach beneficiaries. For example, a distribution in trust may designate that beneficiaries should receive their inheritance through a separate established trust that receives a percentage of their share each year until they reach a certain age.
Or, if a trust provides for a discretionary trust distribution, the trustee has the authority to determine which beneficiaries will receive what portions of the inheritance and when.
What is a preliminary trust distribution?
A preliminary trust distribution occurs when a trustee releases some of the trust assets to beneficiaries before the final asset distribution. A preliminary distribution is helpful when beneficiaries need distributions but there are issues like estate taxes, the sale of property or other assets, or beneficiary disputes that delay the final distribution of the entirety of the estate.
In these instances, a trustee may carry out a preliminary distribution to allow beneficiaries to access their rightful distribution to assets sooner. A preliminary distribution may also be helpful in cases where trustees have to gain access to and appraise tangible assets like artwork or property. If there are liquid assets in a bank that can be easily distributed, it may make sense for a trustee to distribute these first.
What is a partial distribution?
A partial distribution of a trust involves a distribution of some of the trust assets by the trustee before they distribute the entirety of the trust’s assets. Essentially, a partial distribution is another name for a preliminary distribution, as these are the same process. A partial distribution can help get assets to beneficiaries sooner when there are other responsibilities or factors causing a delay.
Successfully navigate the trust distribution process
Trustees have a responsibility to distribute a trust within a reasonable time. However, what constitutes a reasonable amount of time can look different for any estate depending on a variety of factors, including the complexity of the trust, potential disputes between beneficiaries, and the time it takes to process debts and expenses.
If you have concerns surrounding the time it takes to receive your inheritance from the trust administration process, you should contact a trust administration attorney as soon as possible. At RMO Lawyers, we take the time to understand your case and determine the best path forward so that you can secure your rightful inheritance. With our decades of experience, we’ll help you work through the trust distribution process and create a winning strategy for your case.
Schedule a consultation with us at RMO today to get started.
